A trading system is a set of rules complete enough that two people following it would take the same trades. If yours needs your judgement in the moment, it is not a system - it is a style, and a style cannot be tested.
What a system must specify
All six. A gap in any one is where the losses come from:
- 1.Market and timeframe. What you trade and on what chart. One of each, to begin with.
- 2.Setup. The exact conditions that must be true. Written so someone else could check them.
- 3.Entry. Where and how you get in once the setup is valid.
- 4.Stop. Where the idea is proven wrong. Decided before entry, always.
- 5.Exit. How you take profit. A target, a trail, a time - but decided in advance.
- 6.Size. How much you risk. A fixed rule, not a feeling about this particular trade.
Testing it without fooling yourself
Once the rules are written you can test them, and this is where most people accidentally lie to themselves. The traps, in order of how often they bite:
- Curve fitting. Test enough variations and one looks excellent by chance. You have not found an edge, you have found a coincidence.
- Hindsight rules. Every rule added to avoid a loss that already happened improves the test and not the strategy.
- Optimistic fills. Backtests fill at the price on the chart. Real orders pay a spread, and in fast markets they fill far away.
- Ignored costs. Tiny per trade, decisive across thousands.
- Too few trades. A hundred trades tells you nothing. Thousands starts to be evidence.
Lesson 3 in the guides covers how to read someone else's published record with the same scepticism - including this site's.
The numbers that actually matter
Not win rate. These:
- Profit factor - gross winnings divided by gross losses. Above 1.0 is profitable; the distance above tells you how much room for error you have.
- Maximum drawdown - the deepest fall from a peak. This decides whether the account survives.
- Drawdown duration - how long it lasted. This decides whether YOU survive.
- Trade count - how much evidence you actually have.
For reference, this account's published record: profit factor 1.97, worst drawdown 10,115 pips over 122 days, across 979 legs. Win rate 55.6% - deliberately listed last, because it is the least informative of the five.
Running it
- 1.Follow it exactly for a defined period. Deviating means you no longer know what you tested.
- 2.Log every trade, including the ones you skipped. The skips are usually the most revealing data you have.
- 3.Review on a schedule, not after a loss. Reviewing when it hurts guarantees you change the wrong thing.
- 4.Change one variable at a time. Change three and you learn nothing about any of them.
Where this course ends
You now have the pieces: how price moves, how to read it, what a level is, where reversals form, how traps work, what actually drives results, what you are up against psychologically, and how to turn it into rules.
None of it makes trading easy. What it does is stop the specific mistakes that end most accounts in the first year - oversizing, revenge trading, abandoning a system mid-drawdown, and mistaking a coincidence for an edge.